angeles city v angeles city

7/28/2019 Angeles City v Angeles City

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end of each calendar quarter or month as may be provided in the respective franchiseor pertinent municipal regulation and shall, any provision of the Local Tax Code or anyother law to the contrary notwithstanding, be in lieu of all taxes and assessments ofwhatever nature imposed by any national or local authority on earnings, receipts,income and privilege of generation, distribution and sale of electric current.

On January 1, 1992, RA 7160 or the Local Government Code (LGC) of 1991 waspassed into law, conferring upon provinces and cities the power, among others, toimpose tax on businesses enjoying franchise.4In accordance with the LGC, theSangguniang Panlungsodof Angeles City enacted on December 23, 1993 TaxOrdinance No. 33, S-93, otherwise known as the Revised Revenue Code of AngelesCity (RRCAC).

On February 7, 1994, a petition seeking the reduction of the tax rates and a review ofthe provisions of the RRCAC was filed with the SangguniangPanlungsodby Metro

Angeles Chamber of Commerce and Industry Inc. (MACCI) of which AEC is a member.

There being no action taken by the SangguniangPanlungsodon the matter, MACCIelevated the petition5to the Department of Finance, which referred the same to theBureau of Local Government Finance (BLGF). In the petition, MACCI alleged that theRRCAC is oppressive, excessive, unjust and confiscatory; that it was published onlyonce, simultaneously on January 22, 1994; and that no public hearings were conductedprior to its enactment. Acting on the petition, the BLGF issued a First Indorsement6tothe City Treasurer of Angeles City, instructing the latter to make representations withthe Sangguniang Panlungsodfor the appropriate amendment of the RRCAC in order toensure compliance with the provisions of the LGC, and to make a report on the actiontaken within five days.

Thereafter, starting July 1995, AEC has been paying the local franchise tax to the Officeof the City Treasurer on a quarterly basis, in addition to the national franchise tax it paysevery quarter to the Bureau of Internal Revenue (BIR).

Proceedings before the City Treasurer

On January 22, 2004, the City Treasurer issued a Notice of Assessment7to AEC forpayment of business tax, license fee and other charges for the period 1993 to 2004 inthe total amount of P94,861,194.10. Within the period prescribed by law, AEC protestedthe assessment claiming that:

(a) pursuant to RA 4079, it is exempt from paying local business tax;

(b) since it is already paying franchise tax on business, the payment ofbusiness tax would result in double taxation;

(c) the period to assess had prescribed because under the LGC, taxesand fees can only be assessed and collected within five (5) years from thedate they become due; and
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(d) the assessment and collection of taxes under the RRCAC cannot bemade retroactive to 1993 or prior to its effectivity.8

On February 17, 2004, the City Treasurer denied the protest for lack of merit andrequested AEC to settle its tax liabilities.9

Proceedings b efore the RTC

Aggrieved, AEC appealed the denial of its protest to the RTC of Angeles City via aPetition for Declaratory Relief,10docketed as Civil Case No. 11401.

On April 5, 2004, the City Treasurer levied on the real properties of AEC.11A Notice ofAuction Sale12was published and posted announcing that a public auction of the leviedproperties of AEC would be held on May 7, 2004.

This prompted AEC to file with the RTC, where the petition for declaratory relief was

pending, an Urgent Motion for Issuance of Temporary Restraining Order and/or Writ ofPreliminary Injunction13to enjoin Angeles City and its City Treasurer from levying,annotating the levy, seizing, confiscating, garnishing, selling and disposing at publicauction the properties of AEC.

Meanwhile, in response to the petition for declaratory relief filed by AEC, Angeles Cityand its City Treasurer filed an Answer with Counterclaim14to which AEC filed a Reply.15

After due notice and hearing, the RTC issued a Temporary Restraining Order (TRO)16on May 4, 2004, followed by an Order17dated May 24, 2004 granting the issuance of aWrit of Preliminary Injunction, conditioned upon the filing of a bond in the amount of

P10,000,000.00. Upon AECs posting of the required bond, the RTC issued a Writ ofPreliminary Injunction on May 28, 2004,18which was amended on May 31, 2004 due tosome clerical errors.19

On August 5, 2004, Angeles City and its City Treasurer filed a "Motion for Dissolution ofPreliminary Injunction and Motion for Reconsideration of the Order dated May 24,2004,"20which was opposed by AEC.21

Finding no compelling reason to disturb and reconsider its previous findings, the RTCdenied the joint motion on October 14, 2004.22

Issue

Being a special civil action for certiorari, the issue in the instant case is limited to thedetermination of whether the RTC gravely abused its discretion in issuing the writ ofpreliminary injunction enjoining Angeles City and its City Treasurer from levying, selling,and disposing the properties of AEC. All other matters pertaining to the validity of thetax assessment and AECs tax exemption must therefore be left for the determination ofthe RTC where the main case is pending decision.
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Petitioners Arguments

Petitioners main argument is that the collection of taxes cannot be enjoined by theRTC, citing Valley Trading Co., Inc. v. Court of First Instance of Isabela, Branch II,23wherein the lower courts denial of a motion for the issuance of a writ of preliminary

injunction to enjoin the collection of a local tax was upheld. Petitioner further reasonsthat since the levy and auction of the properties of a delinquent taxpayer are proper andlawful acts specifically allowed by the LGC, these cannot be the subject of an injunctivewrit. Petitioner likewise insists that AEC must first pay the tax before it can protest theassessment. Finally, petitioner contends that the tax exemption claimed by AEC has nolegal basis because RA 4079 has been expressly repealed by the LGC.

Private respondents Arguments

Private respondent AEC on the other hand asserts that there was no grave abuse ofdiscretion on the part of the RTC in issuing the writ of preliminary injunction because it

was issued after due notice and hearing, and was necessary to prevent the petition frombecoming moot. In addition, AEC claims that the issuance of the writ of injunction wasproper since the tax assessment issued by the City Treasurer is not yet final, havingbeen seasonably appealed pursuant to Section 19524of the LGC. AEC likewise pointsout that following the case of Pantoja v. David,25proceedings to invalidate a warrant ofdistraint and levy to restrain the collection of taxes do not violate the prohibition againstinjunction to restrain the collection of taxes because the proceedings are directed at theright of the City Treasurer to collect the tax by distraint or levy. As to its tax liability, AECmaintains that it is exempt from paying local business tax. In any case, AEC countersthat the issue of whether it is liable to pay the assessed local business tax is a factualissue that should be determined by the RTC and not by the Supreme Court via a

petition forcertiorariunder Rule 65 of the Rules of Court.

Our Ruling

We find the petition bereft of merit.

The LGC does not specifically prohibit an injunction enjoining the collection of taxes

A principle deeply embedded in our jurisprudence is that taxes being the lifeblood of thegovernment should be collected promptly,26without unnecessary hindrance27or delay.28In line with this principle, the National Internal Revenue Code of 1997 (NIRC) expressly

provides that no court shall have the authority to grant an injunction to restrain thecollection of any national internal revenue tax, fee or charge imposed by the code.29Anexception to this rule obtains only when in the opinion of the Court of Tax Appeals(CTA) the collection thereof may jeopardize the interest of the government and/or thetaxpayer.30

The situation, however, is different in the case of the collection of local taxes as there isno express provision in the LGC prohibiting courts from issuing an injunction to restrain
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local governments from collecting taxes. Thus, in the case ofValley Trading Co., Inc. v.Court of First Instance of Isabela, Branch II, cited by the petitioner, we ruled that:

Unlike the National Internal Revenue Code, the Local Tax Code 31does not contain anyspecific provision prohibiting courts from enjoining the collection of local taxes. Such

statutory lapse or intent, however it may be viewed, may have allowed preliminaryinjunction where local taxes are involved but cannot negate the procedural rules andrequirements under Rule 58.32

In light of the foregoing, petitioners reliance on the above-cited case to support its viewthat the collection of taxes cannot be enjoined is misplaced. The lower courts denial ofthe motion for the issuance of a writ of preliminary injunction to enjoin the collection ofthe local tax was upheld in that case, not because courts are prohibited from grantingsuch injunction, but because the circumstances required for the issuance of writ ofinjunction were not present.

Nevertheless, it must be emphasized that although there is no express prohibition in theLGC, injunctions enjoining the collection of local taxes are frowned upon. Courtstherefore should exercise extreme caution in issuing such injunctions.

No grave abuse of discretion was committed by the RTC

Section 3, Rule 58, of the Rules of Court lays down the requirements for the issuance ofa writ of preliminary injunction, viz:

(a) That the applicant is entitled to the relief demanded, and the whole orpart of such relief consists in restraining the commission or continuance of

the acts complained of, or in the performance of an act or acts, either for alimited period or perpetually;

(b) That the commission, continuance or non-performance of the act oracts complained of during the litigation would probably work injustice tothe applicant; or

(c) That a party, court, or agency or a person is doing, threatening, orattempting to do, or is procuring or suffering to be done, some act or actsprobably in violation of the rights of the applicant respecting the subject ofthe action or proceeding, and tending to render the judgment ineffectual.

Two requisites must exist to warrant the issuance of a writ of preliminary injunction,namely: (1) the existence of a clear and unmistakable right that must be protected; and(2) an urgent and paramount necessity for the writ to prevent serious damage.33

In issuing the injunction, the RTC ratiocinated that:
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It is very evident on record that petitioner34resorted and filed an urgent motion forissuance of a temporary restraining order and preliminary injunction to stop thescheduled auction sale only when a warrant of levy was issued and published in thenewspaper setting the auction sale of petitioners property by the City Treasurer, merelyfew weeks after the petition for declaratory relief has been filed, because if the

respondent will not be restrained, it will render this petition moot and academic. To themind of the Court, since there is no other plain, speedy and adequate remedy availableto the petitioner in the ordinary course of law except this application for a temporaryrestraining order and/or writ of preliminary injunction to stop the auction sale and/or toenjoin and/or restrain respondents from levying, annotating the levy, seizing,confiscating, garnishing, selling and disposing at public auction the properties ofpetitioner, or otherwise exercising other administrative remedies against the petitionerand its properties, this alone justifies the move of the petitioner in seeking the injunctivereliefs sought for.

Petitioner in its petition is questioning the assessment or the ruling of the City Treasurer

on the business tax and fees, and not the local ordinance concerned. This being thecase, the Court opines that notice is not required to the Solicitor General since what isinvolved is just a violation of a private right involving the right of ownership andpossession of petitioners properties. Petitioner, therefore, need not comply with Section4, Rule 63 requiring such notice to the Office of the Solicitor General.

The Court is fully aware of the Supreme Court pronouncement that injunction is notproper to restrain the collection of taxes. The issue here as of the moment is therestraining of the respondent from pursuing its auction sale of the petitioners properties.The right of ownership and possession of the petitioner over the properties subject ofthe auction sale is at stake.

Respondents assert that not one of the witnesses presented by the petitioner haveproven what kind of right has been violated by the respondent, but merely mentioned ofan injury which is only a scenario based on speculation because of petitioners claimthat electric power may be disrupted.

Engr. Abordos testimony reveals and even his Affidavit Exhibit "S" showed that if theauction sale will push thru, petitioner will not only lose control and operation of itsfacility, but its employees will also be denied access to equipments vital to petitionersoperations, and since only the petitioner has the capability to operate Petersville substation, there will be a massive power failure or blackout which will adversely affectbusiness and economy, if not lives and properties in Angeles City and surroundingcommunities.

Petitioner, thru its witnesses, in the hearing of the temporary restraining order,presented sufficient and convincing evidence proving irreparable damages and injurywhich were already elaborated in the temporary restraining order although the samemay be realized only if the auction sale will proceed. And unless prevented, restrained,
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and enjoined, grave and irreparable damage will be suffered not only by the petitionerbut all its electric consumers in Angeles, Clark, Dau and Bacolor, Pampanga.

The purpose of injunction is to prevent injury and damage from being incurred,otherwise, it will render any judgment in this case ineffectual.

"As an extraordinary remedy, injunction is calculated to preserve or maintain the statusquo of things and is generally availed of to prevent actual or threatened acts, until themerits of the case can be heard" (Cagayan de Oro City Landless Res. Assn. Inc. vs.CA, 254 SCRA 220)

It appearing that the two essential requisites of an injunction have been satisfied, asthere exists a right on the part of the petitioner to be protected, its right[s] of ownershipand possession of the properties subject of the auction sale, and that the acts(conducting an auction sale) against which the injunction is to be directed, are violativeof the said rights of the petitioner, the Court has no other recourse but to grant the

prayer for the issuance of a writ of preliminary injunction considering that if therespondent will not be restrained from doing the acts complained of, it will preempt theCourt from properly adjudicating on the merits the various issues between the parties,and will render moot and academic the proceedings before this court.35

As a rule, the issuance of a preliminary injunction rests entirely within the discretion ofthe court taking cognizance of the case and will not be interfered with, except wherethere is grave abuse of discretion committed by the court.36For grave abuse ofdiscretion to prosper as a ground forcertiorari, it must be demonstrated that the lowercourt or tribunal has exercised its power in an arbitrary and despotic manner, by reasonof passion or personal hostility, and it must be patent and gross as would amount to an

evasion or to a unilateral refusal to perform the duty enjoined or to act in contemplationof law.37In other words, mere abuse of discretion is not enough.381avvph!1

Guided by the foregoing, we find no grave abuse of discretion on the part of the RTC inissuing the writ of injunction. Petitioner, who has the burden to prove grave abuse ofdiscretion,39failed to show that the RTC acted arbitrarily and capriciously in granting theinjunction. Neither was petitioner able to prove that the injunction was issued withoutany factual or legal justification. In assailing the injunction, petitioner primarily relied onthe prohibition on the issuance of a writ of injunction to restrain the collection of taxes.But as we have already said, there is no such prohibition in the case of local taxes.Records also show that before issuing the injunction, the RTC conducted a hearingwhere both parties were given the opportunity to present their arguments. During thehearing, AEC was able to show that it had a clear and unmistakable legal right over theproperties to be levied and that it would sustain serious damage if these properties,which are vital to its operations, would be sold at public auction. As we see it then, thewrit of injunction was properly issued.

A final note. While we are mindful that the damage to a taxpayers property rightsgenerally takes a back seat to the paramount need of the State for funds to sustain
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governmental functions,40this rule finds no application in the instant case where thedisputed tax assessment is not yet due and demandable. Considering that AEC wasable to appeal the denial of its protest within the period prescribed under Section 195 ofthe LGC, the collection of business taxes41through levy at this time is, to our mind,hasty, if not premature.42The issues of tax exemption, double taxation, prescription and

the alleged retroactive application of the RRCAC, raised in the protest of AEC nowpending with the RTC, must first be resolved before the properties of AEC can belevied. In the meantime, AECs rights of ownership and possession must be respected.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.

MARIANO C. DEL CASTILLOAssociate Justice

WE CONCUR:

RENATO C. CORONAChief JusticeChairperson

PRESBITERO J. VELASCO, JR.Associate Justice

TERESITA J. LEONARDO-DECASTRO

Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that theconclusions in the above Decision had been reached in consultation before the casewas assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONAChief Justice

Footnotes

1Rollo, pp. 3-17.

2Amended by Republic Act No. 9381, which lapsed into law on March 9,2010.
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3Sec. 3-A. The franchise tax paid for the gross earnings from electriccurrent sold under this franchise shall be in lieu of all taxes, fees andassessments of whatever authority now and in the future upon privileges,capital stock, income, franchise, right of way, machinery and equipment,poles, wires, transformers, watt-hour meters, insulators of the grantee and

all other property owned or operated by the grantee under this concessionor franchise, from which taxes and assessments the grantee is herebyexpressly exempted.

4SECTION 137. Franchise Tax. Notwithstanding any exemption grantedby any law or other special law, the province may impose a tax onbusinesses enjoying a franchise, at the rate not exceeding fifty percent(50%) of one percent (1%) of the gross annual receipts for the precedingcalendar year based on the incoming receipt, or realized, within itsterritorial jurisdiction.

In the case of a newly started business, the tax shall not exceedone-twentieth (1/20) of one percent (1%) of the capital investment.In the succeeding calendar year, regardless of when the businessstarted to operate, the tax shall be based on the gross receipts forthe preceding calendar year, or any fraction thereon, as providedherein.

5Rollo, pp. 63-73.

6Id. at 74.

7

Id. at 81-91.8Id. at 92-96.

9Id. at 103.

10Id. at 18-37; The Petition for Declaratory Relief filed by AEC should beconsidered as an appeal under Section 195 of the LGC. In the case ofCJH Development Corporation v. Bureau of Internal Revenue, G.R. No.172457, December 24, 2008, 575 SCRA 467, it was ruled that courts donot have jurisdiction over petitions for declaratory relief involving tax

assessments.11Id. at 113-114.

12Id. at 157-158.

13Id. at 104-112.
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14Id. at 124-131.

15Records, pp. 120-124.

16Rollo, pp. 132-137.

17Id. at 138-143.

18Records, pp. 154-155.

19Id. at 157-158.

20Rollo, pp. 144-150.

21Records, pp. 190-194.

22

Rollo, pp. 151-154.23253 Phil. 494 (1989).

24SECTION 195. Protest of Assessment. When the local treasurer or hisduly authorized representative finds that the correct taxes, fees, orcharges have not been paid, he shall issue a notice of assessment statingthe nature of the tax, fee, or charge, the amount of deficiency, thesurcharges, interests and penalties. Within sixty (60) days from the receiptof the notice of assessment, the taxpayer may file a written protest withthe local treasurer contesting the assessment; otherwise, the assessment

shall become final and executory. The local treasurer shall decide theprotest within sixty (60) days from the time of its filing. If the local treasurerfinds the protest to be wholly or partly meritorious, he shall issue a noticecancelling wholly or partially the assessment. However, if the localtreasurer finds the assessment to be wholly or partly correct, he shall denythe protest wholly or partly with notice to the taxpayer. The taxpayer shallhave thirty (30) days from the receipt of the denial of the protest or fromthe lapse of the sixty-day (60) period prescribed herein within which toappeal with the court of competent jurisdiction otherwise the assessmentbecomes conclusive and unappealable.

25

111 Phil. 197, 199-200 (1961).26Filipino Metals Corp. v. Secretary of the Dept. of Trade and Industry,502 Phil. 191, 198 (2005).

27Republic v. Caguioa, G.R. No. 168584, October 15, 2007, 536 SCRA193, 223-224.
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28Valley Trading Co., Inc. v. Court of First Instance of Isabela, Branch II,supra note 23 at 500.

29National Internal Revenue Code of 1997, Section 218.

30

Section 11 of RA 1125, as amended by Section 9 of RA 9282.31Now Local Government Code.

32Valley Trading Co., Inc. v. Court of First Instance of Isabela, Branch II,supra note 23 at 499.

33Talento v. Escalada, Jr., G.R. No. 180884, June 27, 2008, 556 SCRA491, 500.

34Herein Private Respondent AEC.

35Rollo, pp. 142-unpaged.

36City of Naga v. Asuncion, G.R. No. 174042, July 9, 2008, 557 SCRA528, 545.

37Levi Strauss (Phils.), Inc. v. Lim, G.R. No. 162311, December 4, 2008,573 SCRA 25, 42-43.

38Basmala v. Commission on Elections, G.R. No. 176724, October 6,2008, 567 SCRA 664, 668.

39Office of the Ombudsman v. Magno, G.R. No. 178923, November 27,2008, 572 SCRA 272, 286-287.

40Valley Trading Co., Inc. v. Court of First Instance of Isabela, Branch II, supra note 23 at 499-500.

41This should be distinguished from real property taxes. Section 231 ofthe LGC provides that an appeal on assessments of real property madeunder the provision of the Code shall, in no case, suspend the collection ofthe corresponding realty taxes on the property involved.

42Vitug, Jose C. and Acosta, Ernesto D., Tax Law and Jurisprudence,

Local
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